Few of them are —. A firm is also like any other business set up in India, but it is typically registered under the Partnership Act, as opposed to the Companies Act. The key characteristic being bringing two individuals together for business and professional gain. A company is an artificial person having the separate identity, common seal and perpetual succession which is formed and governed by a law.
The registration of the partnership firm is not compulsory whereas a Private Limited Company needs to get Compulsory Registration. For the Formation of a partnership, There must be at least two partners. For the Formation of a Private Limited Company, there must be at least 2 members and maximum of 50 in case of private companies. The Major difference between the Private Limited Company and Partnership there is no minimum capital requirement for starting a partnership firm and the minimum capital requirement for a private company it is 1 lakh.
If a Dissolution of the partnership firm Takes place Then there are no legal formalities that need to be taken care. A Private Limited Company has many legal formalities for winding up that needs to be taken care of. MLA 8 Njogu, Tabitha. Name required. Email required. Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment.
Notify me of followup comments via e-mail. Written by : Tabitha Njogu. Publicacions de la Universitat Jaume I, Fundamentals of Financial Management. Cengage Learning Publishers, Liability of members is limited to the extent of the unpaid value of shares subscribed. Cost of Formation The cost of formation is very minimal. Cost of incorporating a company is relatively high and also there is a requirement of minimum capital contribution.
Minimum Capital requirement There is no such requirement of capital for business to be registered as a firm. Legal Formalities No legal formalities as such while forming or dissolving a partnership firm. Many legal formalities are required to be completed when a company is incorporated or dissolved. Management Partners themselves are the management of the concern in the case of a firm. There are 2 categories of partners — working and sleeping. Working Partners are the ones who can be part of the management of the firm.
Directors form the management in the case of a company. There are 2 categories of directors — executive and non-executive. Executive directors are the ones who can be part of the management of the companies. Foreign Participation Foreign nationals cannot be introduced as partners in the firm. Foreign nationals can invest under the Automatic Route i.
This can lead to additional compliance cost to the company for required compliances of RBI. Statutory Meetings There is no provision in this regard for holding of any meeting by the partners. Board Meetings and General Meetings are required to be conducted at appropriate time as per the provisions mentioned in the Companies Act, Withdrawal of Profits The partners can withdraw profits by way of Salary, Bonus, commission, interest on capital or other remuneration which is taxable in their hands as business income.
Any withdrawal beyond the prescribed limits is disallowed in the computation of income for the firm and the firm has to pay the tax on the same. These portions of the profits are exempt in the hands of the partners thereby avoiding double taxation. The promoters cannot withdraw any profits except in the form of dividends which can be declared by management only. Profits are taxed in the books of the company at applicable tax rates, thereby leaving no scope of withdrawal of tax free profits.
Further, the dividends received are also taxed in the hands of the shareholders. There by there is a double taxation — one at the time of accruing and other at the time of distribution. Limitation to withdrawal of profits. As mentioned above, the maximum prescribed amounts of salaries, bonus, commissions or other remunerations to all partners during previous year are given below: The maximum ceiling for payment of managerial remuneration by a company these payments are not to the owners of the Company :.
Regular Compliances a. No other compliance from tax or statutory point of view a. Heavy penalties and late fees in events of defaults in filing
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